By unanimous vote, the Oregon Senate gave final approval to Senate Bill 301 Tuesday.

The bill, which sparked threats from business lobbyists and partisan debate in the House, was intended to reconnect Oregon to portions of the federal code for 2010.

One key provision would allow Oregonians a state tax deduction of up to $4,000 for college tuition, books and other related expenses. It also would allow parents to keep their children on their health plans until they reach age 26 without being taxed on the benefit.

The bill did not include a host of business tax breaks, including accelerated depreciation on equipment. But lawmakers -- as well as the business community -- thought that portion of state law would be fully reconnected with the federal code for 2011.

But just before the final House vote last week, lawmakers not only discovered mistakes in the tuition tax bill, they also learned that Oregon law did not reconnect for the 2011 business breaks.

Business and industry lobbyists flooded House members with letters asking for a fix to be included in the bill. They warned that failure to do that could bring back the bitter political divisiveness seen in 2009, when legislators voted to increase taxes on corporations and high-income earners.

The tax breaks will mean that businesses will save about $93 million and state government will have that much less to spend on schools, prisons and social services in the next two years. But supporters argued the breaks are necessary to get Oregon's economy back on track.

Just to make sure I'm understanding this (and please, disabuse me in comments if you're so moved), the Oregon Legislature just rushed through a $93 million tax giveaway to corporations at a time when the Oregon budget is $3.5 BILLION in the hole? And Democrats actually went along with this?

What am I missing? And why exactly would there be a "bitter division" on this when taxpayers in Oregon ALREADY VOTED to make it so corporations have to pay more--because we have to balance our state budget? If lawmakers are worried about "bitter division", perhaps they'd better look to the voters instead of the vaunted business lobby.

Comments

Carla, it was worse. the Dems did not oppose the tax breaks - they simply wanted 48 hrs to study it & make sure they were doing the right thing. Rep Barnhart gave his word there would be a vote on Wednesday. Rep Gelser pointed out what $93 million reprsents in terms of teachers, etc. all the Rs could offer was "this will create jobs now". to which Rep Buckley replied, you've shown us NO facts.

so the Rs rushed this thru, not simply to create jobs thru tax breaks (an unproven premise in this case) but to show the Ds who had the power. in the end, 2 Dems broke & undermined both the budget & their caucus' power for the rest of the session.

My understanding is that the revenue estimates that the legislature has been given all along already included ALL of the reconnects, including the business tax breaks. So these aren't additional reductions in revenues, but simply conforms the bill to what had already been anticipated by both parties.

I think Geoff Sugarman's comment below is accurate. For whatever reason, when the session started, I think both parties believed the Oregon disconnect from the business tax breaks automatically expired and that's why they were left out of the original Senate reconnect bill.

Business lobbyists thought there was agreement that the business tax breaks would be reconnected. As Geoff explains, most Democrats had simply accepted reconnect as inevitable since they thought they needed a supermajority to avoid it, which they knew they couldn't get.

The fact that the revenue projections were always based on the reconnect occuring supports the notion that this was a surprise to everyone and explains why Republicans, and the business lobby, suspecgted that Democrats were trying to renege on a deal.

Democrats, on the other hand, felt they had been misled (unintentionally, to be sure) and therefore deserved the chance to revisit the issue.

As it turned out, they didn't have the votes in any event and I don't believe they would have had them in two days. But my comment about the revenue projections is not intended to address the merits of reconnecting or not reconnecting, but rather to explain why this shouldn't be viewed as some sudden cave-in to business interests.

Republicans couldn't get what they wanted in the previous session, and were miffed over 66/67. It seems to me Democrats were fearful of how Republicans could use the issue against them in 2012 if it didn't pass.

I think there are two schools of thought here:

Democrats believe in most state/social programs and therefore certain revenues have to come in to fund them. When it comes to incentives, it seems Democrats believe most businesses don't need tax breaks because they'd make the investments anyway.

Republicans, on the other hand, don't see the need for certain programs/agencies and want a smaller government. This could be part of a political move to force certain programs to be cut, along with promoting their "business friendly" rhetoric.

I think this is a classic example of what happens when power changes over, especially in a time when the main topic is jobs and the economy.

I don't know the particulars, so I will withhold judgment. As Carl Wolfson put it so eloquently this morning, if you can fully justify a tax expenditure as doing something for the public good that would not be done otherwise, then it deserves to be treated as any other sort of expenditure.

The rub comes when arguments for tax expenditures are abused - business promising to make jobs if they get a special only-for-them tax loophole, and then not delivering, or laying people off. There certainly has been plenty of that.

But let me make this very clear: Democrats are the party of FACT BASED GOVERNANCE. It's Republicans and the Tea Party whose entire existence is predicated on budgetary myths and ignorance (spiced with hefty dollops of bigotry and racism).

So let this not be our "Keep the bad govmint outta my Medicare" moment. I will wait for an explanation from our legislature before I pass judgment on why this was done.

It's hard for me to understand exactly what is going on. The business tax breaks are the difference between connecting with federal tax codes or not? Does that mean that these businesses are getting additional tax breaks from federal gov in terms of some kind of matching or something?

I think on the one hand, these are not exactly my priorities, but on the other hand, if this does not change the bottom line that the legislators were already anticipating, them it is basically the cost of bipartisanship, especially if re-connecting the tax codes brings more federal $ to Oregon in the end. I don't know how unreasonable that is, but it seems in the spirit of getting things done rather than just fighting all the time.

The effort to postone 301 yesterday was done to separate the issue into two bills -- one dealing with tax breaks for families in 2010 and one dealing with the bonus depreciation issue for 2011. That would have allowed an up and down vote on two separate issues. It would have allowed the Senate to consider bonus depreciation separately in a public hearing and not have endangered the tax benefits for over 50,000 Oregon families. All 30 Democrats suported that effort. Unfortunately, the R's refused to postpone. The minority report adding the bonus depreciation languauge then passed 32-28. The entire bill -- including the tuition and health care issue for families -- was part of the final vote which ended up 41-19.

Thanks for weighing in, Geoff (Geoff Sugerman, for those that don't know, works for Dem House Leader Dave Hunt's office).

I think the part that's not adding up for me (and maybe I'm all by myself on this--wouldn't be the first time) is the drumbeat in the media by legislators and the Gov about the budget shortfall. It seems like if these tax giveaways were part of the initial shortfall calculus, could we not have eliminated them and saved ourselves more hacking away at our already slashed up budget?

It's complicated for a non-tax lawyer or non-CPA such as myself. But originally, itwe were told by LEgislative Counsel and others that we automatically reconnected with the federal tax changes on bonus depreciation. To disconnect again (as we did in 2009) would have required a supermajority vote of 36-24 and the votes were not there in the 30-30 House.

When it was discovered that we were not automatically connected (which occured just before the original floor vote two weeks ago), the bill was sent back to committee. At that time, an effort by republican members of the committee to add in bonus depreciation failed, thus spurring the minority report that was approved yesterday.

So, that's a long way of saying it was originally in the Governor's initial budget because all of us were told Oregon was automatically reconnected to those federal provisions. And that pretty much takes you upto the floor vote on Monday.

Process issues aside, while accelerated depreciation is not economically toxic in the way other features of the Federal tax package were (e.g., cutting the rate of the estate tax and extending the outrageously low rate on the incomes of the wealthiest hedge fund managers), it's most likely a very poor form of economic stimulus. The Center on Budget and Policy Priorities found a couple of years ago that, at least on the Federal side, a dollar of this type of benefit yielded only 27 cents of additional demand - much lower than other types of stimulus.

It is important to remember that when a business buys an asset, they are allowed to depreciate it over a fixed no. of years(3-39 depending on its class). Accelerated dep. simple allow the business to take more in the first year. It doesn't change how much they can take in total, just the first year.

THis is just one example, but I know of a business that is experiencing growth in their most labor/capital intensive part of their business. They are hiring and adding equipment to meet this growth without any real tangible profit from it. They hope that these new customers will use their more profitable services in the future. I can imagine that being able to depreciate all of their purchases and lowing their tax burden will be beneficial to them and their continued growth.

This is just one example, but I know of a school that's closing. They have experienced a reduction in operating budgets over the past several years and now their students are forced to move to another under-supported, under-funded school.
Boy, I hope those awesome jobs will be there in 18years because they're gonna need them.
What was the name of that company again?

I don't think that the argument for reconnecting on the business side is that the tax benefits create jobs at the companies who receive them; it's that accelerated depreciation is an incentive to businesses to make capital purchases now, rather than later, and that creates jobs at the companies that make that capital equipment (some of which are in Oregon; some of which are not). As an investor in a company that sells capital equipment, the existence of the federal accelerated depreciation is something we promote in the sales process and it probably does accelerate some sales. I don't know whether customers in Oregon or other states factor in the state acceleration (or lack thereof) in their thinking.

Bob - thanks for this note, and what you say makes sense. The come back would be that what most drives capital purchases is demand for the company's products and services, and that other types of incentives or stimulus do more to drive that demand (and thus the new equipment purchases) than do the depreciation breaks.

a Rep i spoke to after this morning's activities said this happens every year, the week after Dorchester. the Rs spend the next week struttin' their stuff. then they get over it and we get back to business.

So, Tualatin HS is going to lay off 15 classroom teachers, and the district is completely shutting down libraries, firing all librarian/media specialists, who teach students to do research and who also order online research resources. How many more teacher layoffs and increased class sizes does $93 million in tax breaks for big business bring us?

Kitz's Department of Administrative Services is proposing to eliminate 61 state custodian positions and subcontract them out. Bret West, administrator of DAS' Operations Division, says, ‘Frankly, we think those outside contractors will pay less money and offer fewer or no benefits.'

The people who do these janitorial jobs make less than a living wage.

The savings from this cost cutting would be 1.5 million dollars a year; less than one one-thousandth of the state’s projected budget gap over the next biennium—and 30 times less than the legislature and governor have just given corporations in the tax break for accelerated depreciation.

The other news about teacher layoffs at Tualatin HS, besides the 15 teachers looking to be gone, the closing down of library,online reference, and research services district wide, is this:
Guess how many administrators being laid off, Zero... Guess how many coaches being laid off.. Zero..

That's your tax dollars at work today in the Tigard/Tualatin School Dist. Undoubtedly it's a pattern being repeated statewide. And we give away another $93 million, and the disaster deepens.

Yes, the Leg gave a $93 million tax break to business, and most of the money will go to multi-state large corporations and NONE of the money is tied to jobs in Oregon. The process was messed up by Leg Counsel and the Oregon Dept of Revenue (and frankly the State Economist and all the business lobbyists who thought they were getting the tax break automatically) reading the 2009-passed disconnect from bonus depreciation wrong....but that does not mean, as implied by Rs and Sugerman that "the loss of the money was in the forecast and governor's budget so we aren't further behind."

The Governor proposes and the Legislature disposes...and in this case they spent $93 million on large multi-state corporations -- mistake reading the law doesn't change that. Notably, the Governor's press release boasting about signing the bill doesn't mention this aspect of the bill.

To the Oregon Legislature:

Enough is enough. Twice in two years, reasonable gun safety proposals have not even received a vote in the Oregon Legislature. No solution is perfect, but we must act now to save lives. We ask you to commit now to passing reasonable gun safety laws at your next opportunity.

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To the Oregon Legislature:

Enough is enough. Twice in two years, reasonable gun safety proposals have not even received a vote in the Oregon Legislature. No solution is perfect, but we must act now to save lives. We ask you to commit now to passing reasonable gun safety laws at your next opportunity.

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This petition sponsored by BlueOregon and Oregon NOW. By signing, you agree to receive email updates from BlueOregon and Oregon NOW about this petition and other critical issues. (You may always unsubscribe, of course.) Learn more.